Reliance Mutual Fund

Presents

Reliance Small Cap Fund

A Fund With A Very Aggressive Investment Style

A Reliance Capital

A Reliance Capital

Table Of Contents
q q q q q

India Opportunity Why Invest in Small Caps Investment Case for Small Caps Success Essentials and Reliance Mutual Fund Advantage Reliance Small Cap Fund

Investment Strategy Positioning Product Features

India Moving Towards Higher Growth Trajectory

...despite concerns of coalition politics, bureaucracy & poor infrastructure

Estimated for 2009-2011 Source: CIEC, RCAM Estimates

India - The Next Trillion Dollar Opportunity

INDIAS GDP IN USD TRILLION

q q

India took 60 years to get to its first USD 1 Trillion GDP in FY08, but the move to USD 2 Trillion GDP will be in next 5-6 years, similar to that of China Due to the huge consumption and savings/investment boom, USD 2 Trillion GDP is not a destination, but a milestone in Indias ongoing journey towards USD 4 Trillion GDP in the subsequent 5-7 years, and so on
Estimated for 2010-2014 Source: CMIE, MOSL, RCAM Estimates

Emerging Markets To Attract Higher Inflows

Period 1995-99 2000-04 2005-09 Avg. World GDP $Bn 30,292 35,291 53,583 Proportion of the World Average GDP level (%) DM countries 80.4 79.5 72.2 US 27.6 30.5 25.7 UK 4.4 4.9 4.6 Euro area 23.2 21.4 22.1 Japan 14.8 12.2 8.7 EM countries 19.6 20.5 27.8 Brazil 2.6 1.7 2.4 Russia 1.0 1.1 2.2 India 2.2 1.5 1.9 China 3.1 4.3 6.5 South Africa 0.5 0.4 0.5 2009 57,228 69.3 24.9 3.8 21.5 8.8 30.7 2.6 2.2 2.2 8.3 0.5

Growing size of EM economy and fading distinction between EM and DM economies should lead to increased capital allocation to EM economies
Period 1995-99 2000-04 2005-09 2009 Avg.World M-Cap 14,047,039 17,734,308 25,689,296 24,630,640 Proportion of the Average World M-Cap (%) DM markets 94.1 95.3 90.1 86.8 United States 46.6 51.9 44.3 42.5 United Kingdom 9.7 10.4 9.6 9.0 Europe (ex-EM) 30.0 29.1 29.0 27.3 Japan 13.8 9.0 9.5 8.6 EM markets 5.9 4.7 9.9 13.2 Brazil 0.7 0.4 1.3 2.2 Russia 0.2 0.2 0.8 0.8 India 0.4 0.3 0.7 1.0 China 0.0 0.3 1.5 2.4 Korea 0.6 0.8 1.4 1.7
MSCI Indices used as proxy for market-cap data (Units: USD million)

Presently, EM economies hold over 30% share in Global GDP, while their share in Global market cap is only 13%

Source: IMF GDP data, MSCI m-cap data, RCAM Estimates, DM : Developed Markets, EM: Emerging Markets

Investments Will Flow To India

USD (Trillion) BRIC GDP Market Cap FII Investments* US GDP Market Cap FII Investments*
q q q

CY2008 8.29 5.61 1.00 14.20 12.09 10.64

CY2014 16.36 16.36 ?? 16.47 16.47 ??

In 2014, BRICs combined GDP will be equal to US GDP At Market Cap GDP ratio of 1, BRIC countries will have a market cap of USD 16.36 Trillion Significant FII money will flow into the BRIC markets India will gets its share of investments

Source - RCAM Estimates, *FII numbers are approximations, BRIC Brazil, Russia, India, China

Investment Outlook
q q q

q q

Currently market is evenly poised with positive bias India has emerged stronger from the global slump and is back on track to grow in excess of 7-8% per annum For a sustained long term growth, the 3 growth drivers are in place: Savings Domestic savings are among the highest in the world Consumption Set to explode Investments At 34% of the GDP, again among the highest in the world Policy announcements will have significant impact on the direction of the market Themes for the coming year Big valuation disparity among large, mid caps & small caps. Opportunity for alpha creation Stock selection will be the key

Source: Bloomberg, RCAM Estimates

Why Invest In Small Caps?

Key Benefits Of Investing In Small Caps

Higher Earnings Growth

r eu en pr tre En

Un de r

-R

es ea rc he d

P ial

H ig

Small Cap
Po te nt ia l

ro w th

e op Sc

R eR of

in at

n sio as
g

Presence in Emerging Sectors

Large Universe

Emergence Of Small Caps To Large Caps

Maturity

Todays Small Caps .

Are Tomorrows Potential Mid Caps, th ow Gr

Which May Eventually Become Large Caps

U tar t S

Small Caps

Mid Caps

Large Caps

Re Rating Potential For Small Caps

Small Cap Mid Cap Large Cap

Research Available

Limited

Moderate

Widely

Institutional Ownership

Very Limited

Moderate

Large

Valuation Multiple

Low

Moderate

Fair

Entrepreneurial Passion
q

Indian entrepreneurial skills / mindset / spirit has been globally acknowledged over a period of time End of License Raj has opened many business opportunities for entrepreneur Multiple sources of fund raising at various stage of business has been of tremendous help Competitive talent is being attracted & retained by rewarding performance linked incentives, ESOPs, etc In todays economic environment, individuals with entrepreneurial mindset are exploring new business opportunities that will not only survive in a recession but will also thrive Thus, Emerging India is offering various growth opportunities to entrepreneurs, be it first generation entrepreneur or otherwise

q q

Emerging Sectors Offer Opportunities For Growth

q

In a developing economy like India, multiple sectors provide opportunities for growth

Example: Retailing, Food Processing, Pharmaceuticals, Media & Entertainment, Real Estate, Education, Hospitality etc

q q

Once established and successful, ramp up can be rapid Thus, emerging sectors are true reflection of entrepreneurial spirit, new opportunities and creation of global behemoths

Dynamics Of Multi - Baggers

Market Capitalization = Net Profits X Perception Market Price = EPS X PE

High Growth Potential / Scalability Differentiated Business Model Emergence of Educated & Passionate Management

Under Ownership, Under Researched & Under Covered Understanding Value of Market Cap Various Modes of Fund Raising Emerging Sectors start small Technology, Retail, Real Estate, Insurance etc

Niche focus & ability to attract talent in form of Quasi Entrepreneurs & Stock Options

This simultaneous impact on both EPS & PE creates a MULTI BAGGER

How Small Caps Are Classified ?

q There is no scientific methodology to classify Large Caps, Mid Caps and Small Caps

but there are pre-defined indices on BSE & NSE

q Mentioned below is the categorization of the same on the basis of market capitalization

as on August 2010
Index Market Cap Range (Rs. Crs) 15,300 329,400 1000 12,350 170 2300 Total Market Cap approx (Rs Crs) 2,761,687 1,078,821 351,840

Indices BSE SENSEX BSE Mid Cap BSE Small Cap

Categorization Large Cap Mid Cap Small Cap

No. Of Companies 30 273 534

Source: www.bseindia.com, 5th August 2010 , Index Market Cap Range given implies companies with the smallest market cap and largest market cap in that particular indices respectively as on August 5, 2010. Small Cap stocks for the purpose of the Reliance Small Cap Fund are stocks whose market capitalization is in between the highest and lowest market capitalization of companies on BSE Small Cap Index

The Indian Small Cap Opportunity

q 4300+ Cos. listed on Bombay Stock Exchange q 1383 Cos. with Market Capitalization of over Rs 100 Cr q 1065 Cos. with Market Capitalization of over Rs 200 Cr q 664 Cos. with a Sales Turnover of over Rs. 200 Cr q 613 Cos. with an Operating Profits over Rs 25 Cr q 548 Cos. with net profits of over Rs 10 Cr

Source : www.bseindia.com, Capitaline Neo as on 6th August 2010

Investment Case For Small Caps

Performance Over The Last 2 Years (31st July 08 - 30th July 10) Index S&P CNX Nifty BSE SENSEX BSE MIDCAP BSE SMALL CAP CAGR (%) 11.32 11.58 15.37 16.32 Outperformance of BSE SMALL CAP Relative To Indices 5.00 4.74 0.95

Valuation As On 31st July 2010 Index S&P CNX Nifty BSE SENSEX BSE MIDCAP BSE SMALL CAP P/E 22.31 21.20 19.24 15.66 Price To Book Value 3.78 3.40 2.90 2.34

Source : www.bseindia.com, Capitaline Neo as on 6th August 2010

Small Caps are still available at better valuations compared to Large Caps

Examples of how Small Cap companies have emerged as Large Cap companies over a period of time creating wealth for the shareholders

The companies chosen herein are purely for illustrative purpose only Reliance Mutual Fund or Reliance Small Cap Fund may or may not invest in the shares of these companies The investment decision of Reliance Mutual Fund to invest in any company is based on several factors including research, market potential, future outlook etc

Retailing
Company Name Market Capitalization (July 30th 2001) (Rs. Cr) Pantaloon Retail (India) 19.98 Market Capitalization (July 30th 2010) (Rs. Cr) 9457.13 Outperformance relative to BSESENSEX (July 30th 2001- July 30th 2010) 19,316%

PAT Rs.140.58 Crs

s ime 22 T y ed B reas c

(30th June 2009)

PAT Rs.6.40 Crs

(30th June 2001)

In

Source as on 31st July 2010, Capitaline Neo

Realty - Construction
Company Name Market Capitalization (July 31st 2003) (Rs. Cr) Unitech 72.44 Market Capitalization (July 30th 2010) (Rs. Cr) 20,457.53 Outperformance relative to BSESENSEX (July 31st 2003- July 30th 2010) 17,550%

88 ed By creas In

s Time

PAT Rs.1,195.53 Crs

(31st March 2009)

PAT Rs.13.57 Crs

(31st March 2003)

Source as on 31st July 2010, Capitaline Neo

Computers - Education
Company Name Market Capitalization (Jan 31st 2006) (Rs. Cr) Educomp Solutions 447.20 Market Capitalization (July 30th 2010) (Rs. Cr) 5,797.46 Outperformance relative to BSESENSEX (Jan 31st 2006- July 30th 2010) 904%

PAT Rs.14.00 Crs

(31st March 2006)

1 d By ease Incr

es 0 Tim

PAT Rs.140.33 Crs

(31st March 2009)

Source as on 31st July 2010, Capitaline Neo

Healthcare
Company Name Market Capitalization (Jan 31st 2001) (Rs. Cr) Apollo Hospitals 715.31 Market Capitalization (July 30th 2010) (Rs. Cr) 4,841.08 Outperformance relative to BSESENSEX (Jan 31st 2001- July 30th 2010) 20%

ed B Increas

y 4 Tim

es

PAT Rs.130.03 Crs

(31st March 2010)

PAT Rs.30.92 Crs

(31st March 2002)

Source as on 31st July 2010, Capitaline Neo

FMCG Food & Dairy Products

Company Name Market Capitalization (July 1st 2003) (Rs. Cr) Zydus Wellness 2.31 Market Capitalization (July 30th 2010) (Rs. Cr) 2,015.23 Outperformance relative to BSESENSEX (July 01st 2003- July 30th 2010) 9,924%

49 d By rease Inc

s Time

PAT Rs.46.71 Crs

(31st March 2010)

PAT Rs.0.94 Crs

(31st March 2003)

Source as on 31st July 2010, Capitaline Neo

Dynamics Of Successful Small Cap Investing

q Stock Selection Small Cap investing is all about stock selection rather than asset allocation q Stock selection based on Size of opportunity Possible higher growth and its sustainability Emerging theme / sector (Example: real estate, retail, food processing etc) Zeal of management to scale and grow q Stock price movement tend to be more volatile Limited research Lesser/negligible institutional ownership q However the sharp volatility subsides over a longer period and makes way for

higher profitability

Reliance Mutual Fund Advantage

q Our Expertise

Bottom up approach has been strongly advocated as the key investment strategy

of Reliance Mutual Fund.

Well-experienced team of investment professionals having Collective experience of over 150 years in Indian equities Most members individually tracking Indian equity markets for well over 15

years
In depth research capabilities to identify small caps with huge growth potential Our research capability empowers the Fund Manager to be BOLD in identifying high

growth potential stocks & manage the RISK associated with it

Only fund in RMFs product basket with a pre-dominant investment focus on

small

Past Performance may or may not be sustained in future

Investment Philosophy
q

With an endeavor to maximize returns & minimize risks by reasonable diversification , primary focus would be on small cap stocks

Investment in Equities of Small Cap Companies : 65%-100%* Investment in Equities of any other Companies : 0%-35%* Investment in Debt & Money Market Securities : 0% - 35%*

Small cap stocks, for the purpose of the fund are defined as stocks whose market capitalization is in between the highest & lowest market capitalization of companies on BSE Small Cap Index

Investment with a longer term horizon

* Please refer detailed asset allocation on slide no 29. Market Capitalization: Market value of the listed company, which is calculated by multiplying its current market price by number of its shares outstanding

Positioning Of Reliance Small Cap Fund

Returns
High High Medium Low
Reliance Small Cap Fund

Medium

Low

Risk

q q

A very aggressive small cap oriented fund A relatively high risk/high return oriented fund characterized by volatility which will get smoothened out over long term investment horizon

Reliance Small Cap Fund will be a vital part of an investors core portfolio that aims to create an alpha for their investments

Scheme Features
Investment Objective
The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of small cap companies and the secondary objective is to generate consistent returns by investing in debt and money market securities BSE Small Cap Index Equity & equity related securities of small cap companies including derivatives# - 65%-100% Equity & equity related securities of any other companies including derivatives# 0%-35% Debt & Money Market Securities **(including investments in securitised debt) - 0% - 35%
** including securitised debt up to 30% # The Scheme proposes to invest at least 65% of the corpus in Equity & equity related instruments of small cap companies which may go upto 100% of the corpus. The investment in Equity & equity related instruments of any other companies other than small cap companies will be in the range of 0-35% of the corpus

Benchmark

Proposed Asset Allocation

Fund Manager

Sunil Singhania

New Fund Offer Price: Rs.10/- per unit

Scheme Features
Choice of Plans/Options
Growth Plan: Growth & Bonus Option Dividend Plan : Dividend Payout Option Dividend Reinvestment Option

Load Structure : During New Fund Offer & Continuous Offer including SIP Installments
Entry Load: Nil Exit Load:

2% If redeemed or switched out on or before completion of 12 months from the date of allotment of units 1% If redeemed or switched out after 12 months but on or before completion of 24 months from the date of allotment of units

Minimum Application Amount

Rs.5000 & in multiples of Re. 1 thereafter

Additional Purchase Amount

Rs.1000 (plus in the multiple of Re.1)

Nil If redeemed or switched out after the completion of 24 months from the date of allotment of units

SIP
Mode of Payment : Auto Debit/ECS

In accordance with the requirements specified by the SEBI circular no. SEBI/IMD/CIR No.4/168230/09 dated June 30, 2009 no entry load will be charged for purchase / additional purchase / switch-in accepted by the Fund. Upfront commission shall be paid directly by the investor to the AMFI Registered Distributor based on the investors assessment of various factors including the services rendered by the AMFI Registered Distributor.

Thank You

A Reliance Capital

Click icon to add table

Click icon to add table Disclaimers

The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the readers. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The Sponsor, The Investment Manager, The Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. None of The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. The Sponsor, The Investment Manager, The Trustee, any of their respective directors, employees including the fund managers, affiliates, representatives including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific sectors mentioned herein. Terms of issue and mode of sale and redemption of units: The Scheme will offer for Subscription/ Switch-in and Redemption / Switch-out of Units on every Business Day on an ongoing basis, within five business days of allotment. The redemption or repurchase proceeds shall be dispatched to the unitholders within 10 Business Days from the date of redemption or repurchase. Investor benefits and general services offered: The Scheme offers Systematic Investment Plan, Auto Switch facility, Online Transactions and Reliance Any Time Money Card during the NFO period. The NAV of Scheme shall be published on a daily basis by the Mutual Fund at least in two daily newspapers and will also uploaded on the AMFI site www.amfiindia.com and Reliance Mutual Fund site i.e. www.reliancemutual.com. Statutory Details: Reliance Mutual Fund has been constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882. Sponsor: Reliance Capital Limited. Trustee: Reliance Capital Trustee Company Limited. Investment Manager: Reliance Capital Asset Management Limited (Registered Office of Trustee & Investment Manager: Reliance House Nr. Mardia Plaza, Off. C.G. Road, Ahmedabad 380 006). The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. Risk Factors: Mutual Funds and securities investments are subject to market risks, and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the securities market. Reliance Small Cap Fund is only the name of the Scheme and does not in any manner indicates either the quality of the Scheme; its future prospects or returns. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The NAV of the Scheme may be affected, interalia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. There are various risks associated with investing in Equities, Bonds, Foreign Securities, investing and use of Derivatives, Securitised Debt and Short Selling & Securities Lending. For Scheme specific risk factors and more details, please refer to the Scheme Information Document & Key Information Memorandum, which is available at all the DISC, Distributors and www.reliancemutual.com. Investors can also call at our call centre 1800-300-11111 (toll free) for more details. Please read the Scheme Information Document and